A federal rule that restricts the ability of creditors to seize funds from federal exempt benefits held in bank accounts went into effect in 2011 and protects the following benefits:
- Social Security
- Social Supplemental Income (SSI)
- Veterans Benefits
- Railroad Retirement and Railroad Unemployment Benefits
- Federal Employee Retirement Benefits
The new rule does not protect military pay or retirement benefits, Coast Guard payments or other federal agencies. In addition, garnishment orders from the federal government or state child support enforcement agencies are not covered by the rule.
According to the National Consumer Law Center, if a bank receives a garnishment order, the bank will be required to determine whether an account contains electronically deposited federal benefit payments. If so, the bank is obligated to protect two months of the federal deposit payments from seizure to satisfy garnishment orders.
To protect funds deposited before the two-month time period, or deposited by check, the recipient will have to follow the state procedure for claiming exemptions.
